Swatch's sales and profits hit by strong franc

"The announced share buyback should be taken positively as should the optimistic 2016 guidance; however, management credibility might be slightly undermined," it said.Reuters | February 03, 2016, 13:56 IST

Analysts polled by Reuters had expected a net profit of 1.195 billion on sales of 8.66 billion.ZURICH: Swiss watchmakerSwatch Group reported a worse than expected 21 per cent drop in net profit to 1.12 billion Swiss francs ($1.10 billion) on a drop in sales on Wednesday, blaming strong exchange rates, but forecast a pick-up in sales in 2016.

Net sales last year slipped 0.9 percent at constant exchange rates to 8.45 billion francs, and were down 3 percent at current exchange rates.

Analysts polled by Reuters had expected a net profit of 1.195 billion on sales of 8.66 billion.

Its shares were indicated 4 percent lower in pre-market business.

Analysts at Helvea noted that second-half and full-year results lagged expectations and management indications and that the second half marked a deterioration from the first six months, so no change in the trend was yet visible.

"The announced share buyback should be taken positively as should the optimistic 2016 guidance; however, management credibility might be slightly undermined," it said in a note to clients.

Swatch said a new share buyback programme from 2016 to 2019 would be worth up to 1 billion francs.

"January 2016 shows positive growth compared to the previous year, especially in mainland China, the company said in a statement. "The Swatch Group expects growth well over 5 percent for the entire year in local currency."

Swiss watchmakers have been facing difficult trading conditions for some time as Chinese consumers, put off by a government crackdown on corruption, no longer splash out on watches as lavishly as before, and a weak oil price dents the spending power of Russian and Middle Eastern customers.

Last November's Islamist attacks in Paris have also added to watchmakers' worries by curbing tourist flows to Europe's luxury shopping capital.

With its 18 brands, Swatch is present across all price categories, from luxurious Breguet timepieces to colourful plastic Swatch watches, a strategy that has often helped it in the past when only some price segments were under pressure.ZURICH: Swiss watchmaker Swatch Group reported a worse than expected 21 per cent drop in net profit to 1.12 billion Swiss francs ($1.10 billion) on a drop in sales on Wednesday, blaming strong exchange rates, but forecast a pick-up in sales in 2016.

Net sales last year slipped 0.9 percent at constant exchange rates to 8.45 billion francs, and were down 3 percent at current exchange rates.

Analysts polled by Reuters had expected a net profit of 1.195 billion on sales of 8.66 billion.

Its shares were indicated 4 percent lower in pre-market business.

Analysts at Helvea noted that second-half and full-year results lagged expectations and management indications and that the second half marked a deterioration from the first six months, so no change in the trend was yet visible.

"The announced share buyback should be taken positively as should the optimistic 2016 guidance; however, management credibility might be slightly undermined," it said in a note to clients.

Swatch said a new share buyback programme from 2016 to 2019 would be worth up to 1 billion francs.

"January 2016 shows positive growth compared to the previous year, especially in mainland China, the company said in a statement. "The Swatch Group expects growth well over 5 percent for the entire year in local currency."

Swiss watchmakers have been facing difficult trading conditions for some time as Chinese consumers, put off by a government crackdown on corruption, no longer splash out on watches as lavishly as before, and a weak oil price dents the spending power of Russian and Middle Eastern customers.

Last November's Islamist attacks in Paris have also added to watchmakers' worries by curbing tourist flows to Europe's luxury shopping capital.

With its 18 brands, Swatch is present across all price categories, from luxurious Breguet timepieces to colourful plastic Swatch watches, a strategy that has often helped it in the past when only some price segments were under pressure.